Taking Back the Minimum Wage Debate

Rush Limbaugh stated on his radio show recently that we Conservatives have lost the debate with the American people on the issue of rasing the federal minimum wage (http://www.rushlimbaugh.com/home/daily/site_010807/content/see_i_told_you_so.member.html). That may be so, but here is my attempt to take the argument back.

Here are the top three reasons why I am opposed to raising the federally mandated minimum wage:
1. It doesn’t work–it does not raise the income of average Americans.
2. It causes unemployment to rise, thus hurting the very people its proponents claim to want to help.
3. It attempts to buck the laws of free market economics.

1. It does not raise the income of average Americans.
In the chart to the right, you can see the average income of Americans over the last 75 years (the blue line is actual data points, the green line is the linear trend). With the exception of a few dips and spikes, the income of the average American has risen steadily, about 2% a year, for the past 75 years, regardless of the minimum wage. The minimum wage has not been increased in nearly 10 years, yet average American incomes continue to rise. Proponents of a minimum wage increase say it’s part of the broader war on poverty. Unfortunately, there is no correlation between raising the minimum wage and raising people’s income so they can emerge from poverty. I wish that were the case, but it does nothing to fight poverty, in fact, if anything, raising the minimum wage puts more families in poverty through unemployment. (data taken from http://www.dol.gov/esa/minwage/chart.htm and http://www.economagic.com/em-cgi/data.exe/var/inflation-cpiu-dec2dec)

2. It causes unemployment to rise.
Take a look at the chart to the left and you will see the correlation between raising the minimum wage and increases in the unemployment level. 4 out of the past 5 major increases in the minimum wage have resulted in unemployment skyrocketing. (data taken from http://data.bls.gov/PDQ/servlet/SurveyOutputServlet?series_id=LNU04000000)

3. It attempts to buck the laws of free market economics.
Regulating the price of labor (i.e. wages), like any other price control, is an ineffective and crude way to micro-manage a free market; it takes supply and demand out of equilibrium. I like this quote from Tim Kane, Ph.D., “The goal of price controls like the minimum wage is essentially to repeal the law of supply and demand, but senators might as well try to repeal the law of gravity” (Minimizing Economic Opportunity by Raising the Minimum Wage). Raising the minimum wage will hinder the growth of our economy. The market needs to be set free to maximize growth and bring increased prosperity to all.

Many things on the surface appear appear to do good, but when analyzed we find they actually harm. Such is the case with chocloate ice cream (I love it, but it goes right to the waist line) and such is the case with the minimum wage. I hope, for the sake of all Americans who wish for increased economic prosperity in the future, that Conservatives in our governament stand strong against this errant policy of increasing the federal minimum wage.

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